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SB21
SENSE AND NONSENSE THE
MORE ALASKA PRODUCTION ACT (MAPA)
Resource Development Council Anchorage, Alaska
May 1, 2014
Scott Goldsmith Institute of Social and Economic Research
University of Alaska Anchorage
Disclosure and Disclaimer
The Bottom Line
• The so-called $2 billion “giveaway” this year under SB21 doesn’t exist.
• Without enhanced production, future tax revenues could be higher under SB21 than ACES if recent price and cost trends continue.
• Under reasonable future market conditions, a modest increase in oil investment would create more state revenues under SB21 than ACES.
• New money into the oil patch creates long lasting jobs and increased consumer purchasing power.
Alaska Constitution, Article VIII, Section 2
The legislature shall provide for the utilization, development, and
conservation of all natural resources belonging to the State, including land and waters, for the maximum benefit of its people.
Production Tax 101
TAX BASE = PRODUCTION TAX VALUE (PTV) =
(Market Price * Production) –
Transportation Costs – Royalties – Lease Costs
TAX LIABILITY =
nominal tax rate * PRODUCTION TAX VALUE – TAX CREDITS
MAPA vs ACES
ACES MAPA
Nominal Tax Rate
25% - 75% 35%
Production Tax Value
No adjustments
Reduction for some NEW OIL
(GVR) Credits Capital Costs Production
Revenue Volatility
The Disappearing “Giveaway”
Why Did the Production Tax Projection Fall $1.29 Billion?
Production Tax Dart Board
Where Did Past Throws Land?
13
12 11
US Petroleum Capital Cost Index
North Slope Production
WATER
OIL
Water to Oil Production Ratio
Average Well Production Rate
More Labor to Do the Squeezing
Where Will Future Darts Land?
Adding a Hypothetical New Project
New Investment Revenues (MAPA-GVE)
New Investment Revenues: Comparison of Tax Regimes
The Value of Future Revenues
Switch to MAPA & New Investment
Job Creation in the Oil Patch
Job Creation from State Revenues
New Investment: Jobs
New Investment: Payroll
Why Do Producers Favor MAPA ?
TAX MINIMIZATION Vs
PROFIT
MAXIMIZATION
Do Incentives Matter ?
SB21
SENSE AND NONSENSE THE
MORE ALASKA PRODUCTION ACT (MAPA)
Resource Development Council Anchorage, Alaska
May 1, 2014
http://www.iser.uaa.alaska.edu/ Scott Goldsmith
Institute of Social and Economic Research University of Alaska Anchorage